To Sell or Not to Sell: That is the Question!

With corporations like Exxon Mobil and Chevron relocating large numbers of employment opportunities to the area, the Houston real estate market is booming with residential and commercial development on the rise. Currently, market conditions are favorable for those considering selling their homes, especially as further growth in hiring continues to drive more potential buyers to the Houston area every day. With less than four months of inventory on the market coupled with continued demand, homes in Houston will continue to sell quickly. As inventory of homes for sale remain at a 12 year low, many homeowners are speculating whether or not now is the most economical time to enter the market.

Because of the mismatch between supply and demand, home prices in Houston are on the rise and costs are increasing, too. In fact, according to a report by HAR released July 16, the median price of a single-family home in June 2013 rose 12.9% to $192,000, and the average price increased 13.8% from last year to $268,085. Both represent the highest prices ever recorded. Compared to June 2012, this past June has brought additional successful results to Houston’s Real Estate Market, as well. On a year-over-year basis, total property sales, total dollar volume and average and median pricing were all up.

After a long, anxious recession, market conditions are exceedingly favorable for all types of housing sectors in Houston. In fact, the Houston area tops Trulia’s list of the “Ten Healthiest Housing Markets for 2013”. So, many homeowners continue to ponder: “Is this the most optimal time to sell?” Houston’s housing market looks like it will remain strong for 2013, but in real estate, there are no guarantees. According to the report by HAR, inventory has begun to level off month-to-month. Therefore, the Houston market might begin to see that there are enough homes for sale to keep up with demand.

Currently, competitively priced homes in desirable locations are selling within weeks (or sometimes, even days), and frequently for the listed price or higher. As the supply begins to meet the demand, it is likely that homes will sell at more moderate prices and not as fast. For those contemplating on selling their home, the critical elements to look at when evaluating what is best are the value and appreciation rates of the home you are selling and the home you might buy.

There are many issues on a national level that impact your home’s value, including unemployment, interest rates, the stock market and more. However, the most significant role in the appreciation of homes depends on the local economy and housing market. The location of the neighborhood; its school district; the proximity to schools, jobs and amenities; real estate sales trends (i.e. how quickly houses in the area are selling); appreciation history (have homes prices increased or decreased over the years?); and the local economy (are local companies hiring? Have companies moved into or away from your area? Is the mix of commercial and residential development changing?) can all determine the value and current appreciation of your home or a home you are looking to move into.

For homeowners looking to move up to a larger home, the rate of appreciation of both properties is instrumental in determining whether the decision results in a loss or profit. For instance, if you want to sell your $200,000 home to move into a $400,000 home in a similar, equally desirable area, the appreciation difference of the more expensive home compared to your home will be costly. If both homes appreciate at 1% a month, you will only earn roughly $2,000 each month that you wait to buy, while the more expensive home is adding approximately $4,000 in value that same month. Therefore, the most economical decision for those moving to a more expensive home or to an area that boasts higher home values is to sell now before demand continues to drive up the price of your desired home and while you can get top dollar for your home.

On the other hand, for homeowners who are downsizing, your home will continue to earn more value as long as the demand remains high. For example, if you are considering moving from your $400,000 home into a $200,000 home in a similar area and each home roughly earns 1% appreciation a month, your home will accrue approximately $4,000 each month that you wait while the cheaper home will roughly only earn an additional $2,000 in value each month. Therefore, you actually profit $2,000 each month that you wait. The same situation applies to those who are moving from a highly desirable area to a less desirable community. However, as inventory levels off, demand for homes will decrease, resulting in a lower selling price on your home and more time sitting on the market.

The decision to stay or sell can be taxing, as it is difficult to know for sure what is in your best interest. There are no guarantees in what will happen in the future of real estate. If supply increases, the value of homes will decrease. As the economy fluctuates, the interest rates will follow. As areas grow and change, home values will continue to vary. All one can rely on in this ever changing industry is the present, so if you know you want to move in the near future, the possibility of earning a few extra bucks might not be worth gambling the future of the market.